Mergers and Acquisitions Law
FCC Pauses 180-Day "Shot Clock" for $3.9 billion Sinclair-Tribune Deal
By Tyler Huseman, Bass, Berry, & Sims
On January 11, 2018, the Federal Communications Commission (FCC) announced that it was pausing its informal 180-day transaction “shot clock” in the proposed $3.9 billion merger between Sinclair Broadcast Group, Inc. (Sinclair) and Tribune Media Company (Tribune). The FCC stated that it was pausing its review in response to an ex parte notice received from Sinclair on January 4, 2018, in which Sinclair stated it “was evaluating divestitures” and “amendments to the applications consistent with the recent changes to the ownership rules” related to a proposed FCC rulemaking. The FCC stated that it has a “strong interest in ensuring a full and complete record upon which to base its decision …” and that it was “appropriate to stop the informal 180-day clock until after the referenced amendments and divestiture applications have been filed and the staff has had an opportunity to review them.” According to the FCC’s docket, the clock currently sits at day 167 out of 180 following a 15-day pause in October. The acquisition has drawn a great deal of scrutiny due to concerns over the consolidation of local media outlets, and will likely continue to be scrutinized moving forward despite Sinclair’s proposed divestures.
FTC Conditions Alimentation Couche-Tard's Acquisition of Jet-Pep
By Ben Tarpley, Bass, Berry, & Sims
On January 9, 2018, the Federal Trade Commission (the FTC) approved an order settling its charges that Alimentation Couche-Tard Inc.’s (ACT) proposed acquisition of Jet-Pep, Inc. (Jet-Pep), would violate federal antitrust law. Under the terms of the proposed acquisition, ACT, a publicly held owner and operator of fuel stations and convenient stores headquartered in Laval, Canada, will acquire ownership of 120 fuel stations from Alabama-based Jet-Pep. However, pursuant to the order, ACT must, within 120 days of the completion of the transaction, divest the fuel stations it acquires in each of the Alabama cities of Brewton, Monroeville, and Valley. ACT must do so because, according to the FTC, retail fuel markets are frequently small and highly localized, and the completion of the proposed acquisition would increase the likelihood that ACT might unilaterally exercise market power to the detriment of consumers in those markets. ACT is no stranger to divestitures, having previously agreed to several others to settle FTC charges in connection with a different transaction.
Delaware Chancery Court Applies the Garner Privilege Exception
By Nathan M. Stech, Husch Blackwell LLP
On January 10, 2018, the Delaware Court of Chancery expounded on the Garner exception in declining the plaintiff’s motion to compel the production of attorney-client privileged documents in the case of Buttonwood Tree Value Partners, L.P., et al. v. R.L. Polk & Co., Inc., et al., C.A. No. 9250-VCG (Jan. 10, 2018). The plaintiffs in this case, the former minority stockholders of R.L. Polk & Co. Inc., (Polk), allege that the controlling stockholders breached their fiduciary duties during a 2011 self-tender, by, among other things, failing to disclose plans to sell the Polk for nearly three times the self-tender valuation. The plaintiffs filed a motion to compel the production of attorney-client privileged documents related to advice sought by Polk in connection with the self-tender and sale of the company, arguing that the Garner exception applied. The Garner exception is a judicially created exception to the attorney-client privilege, and is available when a corporation is in a suit with its stockholders on charges of acting against stockholder interests, and protection of those interests require that the availability of the privilege be subject to the right of the stockholders to show good cause why the privilege should not apply. Vice Chancellor Sam Glasscock III denied the motion, focusing on three factors: (i) the colorability of the claim; (ii) the extent to which the communication is identified as opposed to the extent the stockholders are merely fishing; and (iii) the apparent necessity or desirability of the information and availability from other sources. The vice chancellor interpreted the first two factors to be “gatekeepers,” and the third factor to be a balancing test weighing the importance of the discovery interests versus the privilege interests in that particular case. While the vice chancellor found that the plaintiffs’ claims had survived a motion to dismiss, thereby satisfying the first factor, and that the plaintiffs had made sufficiently detailed requests to satisfy the second factor, the third factor tipped in favor of the defendants due to the availability of the same information through other sources.
Section 220 Demands Not Precluded by Corwin
By Jordan Elliott, Husch Blackwell LLP
On December 29, 2017, the Delaware Court of Chancery rejected a defendant’s argument that a stockholder’s approval of an acquisition precluded the stockholder from later demanding corporate records pursuant to 8 Del. C. § 220 to determine if the corporate officers or directors violated any Revlon duties. After the acquisition of West Corporation by Apollo Global Management, the plaintiff-stockholder served a § 220 demand upon West Corporation to inspect the books and records of the corporation to determine if any wrongdoing or mismanagement had taken place by the corporation’s directors or officers in connection with the acquisition. Evidence indicated that the stockholders may have received more value if West Corporation agreed to a segmented sale, rather than the whole-company sale to Apollo Global Management. West Corporation denied the plaintiff- stockholder’s § 220 demand and asserted that any breach of fiduciary duties related to the acquisition were cleansed by the plaintiff-stockholder’s approval of the acquisition under Corwin v. KKR Fin. Holdings, LLC. Accordingly, West Corporation reasoned that any claim for breach of fiduciary duty resulting from the inspection of the corporate books and records would lack merit. The court rejected West Corporation’s argument that Corwin precluded a stockholder from demanding corporate books and records under § 220 because any violation of fiduciary duties were cleansed by the stockholder’s approval of the acquisition. Citing settled Delaware precedent, the court held that a stockholder need not prove wrongdoing or mismanagement actually occurred when demanding corporate records under § 220.
Stockholder's Fiduciary Duty Claim Related to Tender Offer Survives Motion to Dismiss; Damages, if any, Believed to be Nominal
By Andrea Stephenson, Husch Blackwell LLP
On December 22, 2017, the Delaware Court of Chancery denied dismissal of a breach of fiduciary duty claim brought against directors and officers of Twin River Worldwide Holdings, Inc. The plaintiff stockholder claims that the directors and officers made misleading disclosures in connection with a tender offer regarding the frequency by which directors and officers sold shares in the company. The plaintiffs claim that such disclosure was made in an effort to increase the price of Twin River’s stock so that after the tender offer closed, the directors and officers could sell their shares at a higher trading price. Although the defendants shopped the sale of their shares after the tender offer expired, as of the date of defendants’ reply brief, June 9, 2017, they had not sold any. Defendants sought to dismiss the breach of fiduciary duty claim for failure to state a claim upon which relief can be granted. The court denied dismissal of the claim, stating if the plaintiff’s allegations are taken as true, then it is reasonably conceivable that the directors breached their fiduciary duties in connection with the disclosures because the efforts defendants took to sell shares cast reasonable doubt on the tender offer disclosure that they “may . . . sell their shares from time to time.” The existence of the defendants’ intention to sell the shares after the offer would have been material information to a stockholder. Therefore, the court determined that the claim was supported for breach of fiduciary duty; however, the court expects the amount of damages on the claim to be nominal.
Ablynx Rejects Unsolicited Conditional Proposal from Novo Nordisk
By Tyler Huseman, Bass, Berry, & Sims
On January 8, 2018, Belgian biotechnology company Ablynx NV (Ablynx) announced it was rejecting an unsolicited conditional proposal from Novo Nordisk A/S (“Novo Nordisk”) to acquire all of the outstanding shares of Ablynx for €28.00 per share in cash and one contingent value right (CVR) per share. The CVR would be linked to two upcoming materials events for an additional value of up to €2.50 per share. Ablynx’s board of directors unanimously concluded that the proposal “fundamentally undervalues the company and its future prospects.” Dr. Edwin Moses, CEO of Ablynx stated “The Board sees no merit in ceding control of its assets without full upfront value recognition for shareholders and believes the proposed consideration and a complex instrument like a CVR does not constitute a basis for further discussions at this time.” Abylnx’s board of directors had previously rejected an earlier bid by Novo Nordisk to acquire the company for €26.75 per share in cash. Novo Nordisk stated that it has “encouraged Ablynx’s Board of Directors to engage in a negotiated transaction for the benefit of all stakeholders.” Ablynx’s rejection of this second proposal shows a commitment to its strategic plan over the proposed acquisition.
European Commission Approves Lufthansa's Acquisition of Air Berlin Subsidiary
By David R. Venturella, Bass, Berry, & Sims
On December 21, 2017, the European Commission announced that it approved Lufthansa’s proposed acquisition of Air Berlin subsidiary Luftfahrtgesellschaft Walter GmbH (LGW), subject to certain conditions. Lufthansa’s purchase and sale agreement with insolvent Air Berlin initially included the acquisition of Austrian airline NIKI as well as LGW. After Lufthansa chose to back out of the NIKI acquisition, the commission concerned itself only with the proposed LGW acquisition. The commission was concerned that Lufthansa would acquire control over a large portfolio of slots at the congested Düsseldorf airport, thereby resulting in higher barriers to entry for airlines that wanted expand their presence in the Düsseldorf airport. To remedy the competition concerns, Lufthansa agreed to amend its purchase and sale agreement with Air Berlin to reduce its acquisition of slots at Düsseldorf.